APWA Board adopts policy encouraging use of the modified approach for complying with GASB Statement 34

APWA's Board of Directors adopted a policy statement in support of GASB Statement 34 at their meeting on December 2, 2000. The board also recommended that public works and infrastructure managers develop close working relationships with those departments that will be responsible for preparing the annual financial statements for state and local government.

The Government Accounting Standards Board (GASB), which defines the criteria that auditors use to judge the adequacy of local and state government financial statements, has changed long-standing practices by requiring that state and local government entities include reporting of their capital assets in their annual balance sheet and income statement. GASB Statement No. 34 (GASB 34), adopted in June 1999, for the first time highlights the costs of acquiring, owning, operating, and maintaining public-works infrastructure for government-bond holders and the public at large.

Statement 34 requires that the value of infrastructure assets be shown on the balance sheet, and gives governments a choice of either (a) adopting traditional private-sector methods of calculating infrastructure depreciation expenses based on historical acquisition costs or (b) adopting an effective asset-management system, also known as the "modified approach." These asset-management systems must demonstrate either that maintenance spending is adequate to prevent infrastructure deterioration or that infrastructure condition is being maintained at or above explicitly stated minimum acceptable standards.

Policy Statement

The American Public Works Association endorses and supports the principles embodied in GASB 34, and urges local and state governments to adopt the "modified approach" to meeting GASB 34 requirements where feasible.

APWA urges its members to develop close, cooperative working relationships with appropriate financial and budget officials to develop reporting procedures that are useful management tools as well as effective reflections of their jurisdictions' financial well-being.